Wednesday, June 27, 2012

The idea, crazy as it sounds, makes a lot of sense. The current hope -- in discussion today in Brussels -- is to consider ways for some central European finance minister to exert veto power over national budgets. That sounds to me like a recipe for disaster and ultimately real vicious conflict between European nations. Do we really want to experiment with that? As an alternative, consider a unilateral German exit from the Euro:

A better, bolder and, until now, almost inconceivable solution is for Germany
to reintroduce the mark, which would cause the euro to immediately
decline in value. Such a devaluation would give troubled economies,
especially those of Greece, Italy and Spain, the financial flexibility they need to stabilize themselves.

Although repeated currency devaluations are not the path to prosperity, a
weaker euro would give a boost in competitiveness to all members of the
monetary union, including France and the Netherlands, which is why they
might very well choose to remain in it even if Germany were to
gradually leave. A resurgence of manufacturing would also allow the vast
unemployment rolls of Spain, Portugal, Greece and other countries to
begin to decline. The tremendous loss of human capital and human dignity
we are witnessing would ease.

Reintroducing the mark would not solve the debt burdens of southern
European countries, but it would give them needed breathing room to
restructure their economies, reform labor markets, collect more taxes
and reassure investors. The ability of the southern European countries
to service their sovereign debt would immediately improve, helping to
end the slow-burning debt and banking crises that have engulfed the
Continent since 2008.

Read the whole proposal here. Sadly I suspect this is a little too bold and creative to actually be considered seriously.

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